For most, accounting (and doing our taxes) feels like a chore we’re forced to do at least once a year.
But yet we all understand how important they are and the role they play in our financial lives.
Personally, I’m a believer that if you master the ‘art’ of doing your taxes, you have it figured out. My reasoning is simple. Doing your taxes generally comes down to being prepared, structured, and organized. All three of these things can be related to all areas of personal finance.
But are these three things really the key to mastering taxes? Are there more fundamentals involved? And what are some of the other tips and tax hacks we can use to stay on top of managing our taxes?
With this in mind, we reached out to several personal finance authorities to find out how they are currently managing their own taxes, and if there was anything they would do differently ten years ago.
We received valuable input and direction from each of the following money experts:
- J. Money (J$) of JMoney.Biz (recently sold Budgets Are Sexy)
- Hannah Spurrier of Our Two Sense
- Michael of Your Money Geek
- Marc Andre of Vital Dollar
- Melissa Hollis of Think Save Retire
There’s arguably hundreds of things you can be doing to manage your taxes, but just like most things, getting started and focusing on the small things usually has the biggest impact. Here are a few tax hacks worth exploring:
- Store your receipts items into a central location as they happen
- Do your tax deductions research
- Document, and store your tax returns
- Record digital copies of your tax records
- Don’t wait until the last minute
Let’s take a look at each one of these in a little more detail.
Tax tip #1: Store your receipts into one central location as they happen
Having access to all of your important documents and receipts when you start working on your taxes can be a game-changer. The more time you have to spend aimlessly searching for all of your receipts and important documents, the bigger the headache.
J. Money from JMoney.Biz (who recently sold Budgets Are Sexy) shares with us one of his personal tips to ensure that he has everything in front of him when he’s ready to start working on his taxes.
“Create a folder labeled ‘annual taxes’ and start throwing everything in there throughout the year that applies.” He continues, “Don’t stress or worry about organizing everything until the end of the year, and by then you’ll have already nixed 80% of the frustration knowing exactly where everything is! If a folder is too small for your records, grab an empty shoebox and just whip out a sharpie!”
Personally, I couldn’t agree more with him. I’ve been using this tip myself for a few years now and it’s saved me countless amounts of hours.
If you’re looking for an easy but effective tax hack you can start using right away, this is it. The next time you receive important receipts or documents, tuck them away in a safe place. Your future-self will thank you for doing so.
Tax tip #2: Do your research
The more aware we are of our options, especially when it comes to money, the better our decision-making will be. That’s why it’s critical to familiarize and equip yourself with understanding your available tax options.
Hannah Spurrier from Our Two Sense explains how researching and understanding available tax deductions is a sure way of optimizing your tax returns.
“Research all of the tax deductions available to you. As a business owner or freelancer, there are many tax deductions that may apply.” She adds, “When I first started freelancing and blogging, I had no idea I could write-off my home office space, education like training or online courses, advertising like Facebook ads, work gear like my professional camera, plus a ton of other business expenses.”
Essentially, by understanding what you can or cannot write off, you’ll not only feel more comfortable and confident when tax season rolls around, but you’ll also save yourself hundreds, if not thousands of dollars. Knowing what tax deductions are available to you can also be a very strategic move with the types of expenses you pay for throughout the year.
Lastly, Hannah adds a final point, “To make sure you’re taking advantage of all the deductions available to you, do your research and work with a professional who can help you.”
If you own and operate your own business, even as a part-time operation, you might be leaving hundreds, if not thousands of dollars on the table.
Tax tip #3: Document, and store your tax returns
Filing and storing your previous tax returns is a small but mighty tip that can significantly help when the next tax season comes around.
Michael from Your Money Geek shares a few pointers on how important it is to make sure you are documenting and storing your tax returns.
“One small but significant tip when it comes to your personal taxes is that you should print out a paper copy of your return. It can be tempting to skip printing your returns after you e-file, however the computer you end up saving your records on could crash, get stolen or need updating. Unfortunately, I learned this the hard way… twice”.
We certainly agree that by recording and documenting last year’s taxes, you’ll feel much better about how you’re managing your taxes the following year.
Lastly, Michael adds “I recommend that you both print your returns and keep them with your other important documents. Scan them, back them up and record multiple copies for record keeping.”
Tax tip #4: Record digital copies of your tax records
Having access to digital copies of your records and important documents is a great way to stay organized and not worry about losing important information.
Marc Andre of VitalDollar.com shares his tips when it comes to filing digital copies.
“Last year I bought a bulk scanner and went through about ten years of tax returns and other related documents to make a digital copy so I could get rid of several boxes of files. It took hours of time to do it, but now that I’m caught up, I’m glad I did it and it makes my organization a lot easier.”
The important takeaway here is to make sure that you’re staying organized and giving yourself access to things when you need them. Storing digital copies is a great way to reduce the number of papers and physical copies you need to store.
Lastly, he adds “Each month I’ll scan my receipts and invoices to make sure I have a convenient digital record of everything without tons of papers everywhere. My best advice would be to keep a digital record of everything from the start.”
Tax tip #5: Don’t wait until the last minute
If you’ve ever left your taxes until the very last minute, then you know just how stressful it can be. For one, you’ll need to make sure you have enough time set aside to properly get through your filings before the deadline hits. Additionally, there’s a very good chance that you’ll run into delays along the way searching for and documenting everything you need to submit.
Melissa Hollis of Think Save Retire shares her tips about how she stays organized and on top of managing her taxes.
“If you take the time to keep track of your finances and stay organized throughout the year, you’ll find that taxes are actually quite easy and even somewhat enjoyable.” She continues, “The alternative—waiting to do it all at once—sounds like a nightmare that can end up leading to a lot of clutter and mess, or worse, impending hours of searching.”
Melissa’s advice is to block off time in your calendar at least on a monthly basis and organize your taxes for the previous month. If you get into the habit of it, organizing everything as you go will reduce the amount of time and energy you need to devote during tax season.
Lastly, Melissa talks about taking advantage of tax deadline extensions if you need to. “Have ZERO shame in opting to take advantage of the deadline extension if you need to, just don’t let that be an excuse to leave it until the last minute.”
Start managing your taxes with confidence
Even just the thought of taxes can be stressful. Let alone actually sitting down, putting in the work, organizing your receipts, and filing them.
However, thanks to our guest experts, you now have a few solid tips (or tax hacks, if you will) you can start using that will help you efficiently manage your taxes. The best part is that these tips can be taken and applied to many other areas of your financial life. Importantly, they teach us that organization, preparation, and planning are fundamental to our success.
